The last-mile delivery of big and bulky e-commerce items will be big business for 3PLs through 2025, following the trend of the past four years, according to a report published Thursday by 3PL research and consulting firm Armstrong & Associates Inc. and the National Home Delivery Association.
According to the report, the highly fragmented $9.3 billion market, which grew at an 18.2% compounded annual rate from 2017 to 2021, will experience 11.8% annual growth from 2022 through 2025. The segment is attracting a broad range of transport and logistics providers, the report said. It will likely continue to do so because it remains relatively unpenetrated, said Evan Armstrong, Armstrong’s president.
3PLs that utilize fleets of independent contractors and freight brokerage operations already deliver many last-mile orders. In addition, truckload, less than truckload, household goods and pure-play last-mile specialists are expanding their capabilities to handle big and bulky items in a bid to accommodate the rapid growth in e-commerce retail sales, the report said.
One of the more significant trends is the growing use of freight brokers to source last-mile carrier capacity, which can often be in short supply. Brokers will also play a more relevant role in last-mile relationships as carriers seek to avoid conflicts arising from state worker classification laws, the report said.
The report canvassed 24 companies, ranging from very large enterprises to businesses with as little as $7 million in annual revenue.
Small packages still account for most of the last-mile traffic, but with e-commerce product categories expanding, consumers and businesses are ordering more big goods like furniture and appliances. However, the end transportation leg of an e-commerce order can be costly, composing 30% to 40% of the total transportation costs. In addition, while a package delivery is relatively simple to execute, a furniture or appliance delivery can involve multiple steps, including entering a consumer’s home to unload and, if necessary, install the merchandise.
For LTL carriers, last-mile per-shipment revenue averages less than $90. That is why LTL carriers have invested more in value-added “white-glove” services for which they can charge more. For example, delivery and setup of an entire bedroom set can generate $250 in revenue, the report said. By contrast, a shipment that is less service intensive may bring in just $50.
Over the past several years, 3PLs have struggled to gain traction in last-mile delivery in part due to service issues and IT shortcomings. While both areas remain challenging for 3PLs, the segment as a whole is getting better, said Armstrong.